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Bad News for Alexion, Shares Down

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The US Food and Drug Administration (FDA) recently issued a warning letter to Alexion Pharmaceuticals, Inc. (ALXN - Free Report) as the company did not comply with the current Good Manufacturing Practices (cGMP) at its manufacturing facility at Rhode Island. Alexion manufactures Soliris, its sole marketed product, at the facility. The drug is available for the treatment of paroxysmal nocturnal hemoglobinuria and atypical hemolytic uremic syndrome.

The US regulatory body issued a warning letter to Alexion Pharma following its inspection of the facility last year. The FDA issued a Form 483 Inspectional Observations to Alexion Pharma following the completion of the inspection on Aug 6, 2012. Alexion Pharma responded to the letter in the same month and subsequently provided additional information to the US regulatory body in Sep and Dec 2012.

However, the response did not satisfy the FDA which issued the warning letter to the company. The FDA also remains concerned about the quality system implemented by Alexion Pharma at the facility. The FDA further stated while issuing the letter that it is dissatisfied with the company’s inadequate investigation of bacterial contamination at its manufacturing facility at Rhode Island.

The news had a negative impact on Alexion Pharma’s shares. The company intends to address the concerns raised by the FDA in the warning letter. Alexion Pharma believes that the warning letter issued by the FDA will not impact the supply of Soliris.

Though current supplies of Soliris may not be interrupted, we believe further slipups by Alexion Pharma regarding Soliris will invite stricter action from the FDA. This will be catastrophic for the company since it is entirely dependent on Soliris for growth.

Alexion Pharma carries a Zacks Rank #3 (Hold).  Favorably placed stocks in the pharma space include Athersys, Inc. (ATHX - Free Report) , Cytokinetics, Inc. (CYTK - Free Report) and Osiris Therapeutics, Inc. . All three stocks carry a Zacks Rank #1 (Strong Buy).

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